Impairment losses arising from possible insolvency of debtors (art. 13.1 LIS) not affected by article 11.12 or TD 33.1 of the LIS

When there is a risk in the collection of a certain credit, entities are obliged from an accounting point of view to provide an impairment loss.

However, article 13.1 of the LIS establishes that only losses due to impairment of credits arising from possible insolvencies of debtors be deductible when at the time of the tax accrual any of the following circumstances occur:

1. That six months has passed since the obligation fell due.

   With effect for tax periods beginning within the years and , Article 14 of Royal Decree-Law 35/2020, of December 22, on urgent measures to support the tourism, hospitality and commerce sectors and in tax matters, establishes that taxpayers who have the status small companies may deduct, in said periods, losses due to impairment of credits arising from possible insolvencies of debtors when three have since the due date of the obligation.

2. That the debtor is declared to be in bankruptcy proceedings.

3. That the debtor is being prosecuted for the crime of concealment of assets

4. That the obligations have been claimed by the courts or are in litigation or arbitration proceedings, the solution of which depends on their collection.

However, even if the above circumstances occur, will not be tax deductible :

• Those corresponding to credits owed by public law entities, except when they are the subject of an arbitration or judicial procedure that deals with their existence or amount.

• Those corresponding to credits owed by related persons or entities, unless they are in a situation of bankruptcy and the liquidation phase has been opened by the judge, in the terms established in Royal Legislative Decree 1/2020, of May 5, which approves the revised text of the Bankruptcy Law.

• Those corresponding to global estimates of the risk of insolvency of clients and debtors.

Filling in form 200

These differences in criteria between the accounting standard and the tax standard determine the need to make a series of adjustments in boxes [ ] and [00322] "Impairment losses under art. 13.1 LIS not affected by art. 11.12 LIS or by DT 33.1 LIS" on page 12 of form 200:

• In box [00321] of increases, the taxpayer will include the amount of losses due to impairment of the value of credits arising from possible insolvencies of debtors recorded in the tax period subject to declaration, which are not tax deductible according to the provisions of article 13.1 of the LIS.

• Instead, the taxpayer will include in box [00322] of decreases the amount of those losses recorded in the period in which they are tax deductible by complying with the requirements of article 13.1 of the LIS.

• When in a tax period after the accounting of the aforementioned impairment losses that gave rise to a positive adjustment to the accounting result (box [00321]) because it was not tax deductible, the recovery of the value of the impairment occurs, the taxpayer must include in box [00322] the amount corresponding to said reversal.